Evening Star

It is so named because just like the planet venus appears just before the sun set, this pattern appears just before price fall.

Formation
This formation consists of three candles.

First day is white candle.

Second day is black or white candle with a small real body, which gaps above the real body of the first day.

Third day is the long black candle, which gaps below the real body of the second day.

Study the chart given below.

On the next day, though the stock opens above the high of the previous day's real body, the demand decreases or the supply increases, so that the momentum of the rising market decreases. The stock closes near the opening, either above or below the opening, but above the close of the previous day. This creates a black or white candle with a small real body.

On the third day, with the bears dominating, the market opens below the real body of the second day, comes down and closes low to create a long black candle.

This is a clear indication of the bearish reversal of the market.

Sometime the gaps may not be obvious.


Counter part of this pattern in a candle chart is Morning Star.

The second day candle may be a doji, which results in Evening Doji Star.